With RBI's Dividend Bonanza, Expect A Boost In Govt Spending

Importantly, a higher-than-expected dividend showcases the health of the domestic economy, as well as the efficiency and functioning of the central bank. 

In 2024-25, the RBI transferred a dividend of Rs 2.1 lakh crore, while the Centre mopped up another Rs 74,000 crore from the central PSUs. Coal India and ONGC were the top dividend payers in the previous financial year. The combined net profit of state-owned PSUs in 2023-24 was more Rs 5 lakh crore. 

“We have managed to reboot the PSUs, and each of the enterprises is now well functioning and profit-making. We have been earning healthy dividends from them, and will continue to provide the support they require to further improve efficiency,” a senior government official told The Secretariat.

Why A Higher Dividend Will Help The Economy 

Amid rising geopolitical and geo-economic uncertainties that have been hitting the domestic economy, the higher-than-expected dividend will help the Centre not only in adhering to its fiscal path and continuing with the reform process, but also in expanding its spending, as it looks to boost consumption-led growth. 

India has set a fiscal deficit target of 4.4 per cent of the GDP for the current financial year. In 2024-25, it stood at 4.8 per cent.

“We will stick to the fiscal consolidation glide path. Though there are some hiccups, our macroeconomic situation is strong, and we are committed to economic growth,” said BJP’s national spokesperson on economic affairs Gopal Krishna Agarwal. 

A lower-than-projected fiscal deficit will help India improve its sovereign rating. Fiscal deficit, one of the most crucial economic indicators, has a bearing on growth and production costs, and could also have an impact on inflation. Though the amount of dividends from PSUs does not directly boost liquidity, it does offset a feel-good mood for industries and stakeholders. 

Relief For Industries, MSMEs

The moolah will provide the required elbow room for the government to maintain liquidity in the banking system, especially of state-owned lenders. Besides, the cost of borrowing may ease for citizens and industries, especially in the micro, small and medium enterprises (MSMEs) sector, which have been battling a liquidity crunch. 

A senior banker on condition of anonymity acknowledged that bank credit to MSMEs has been thinning, and several lenders have been insisting on collateral. “We could see an ease in credit flow to MSMEs, as banks are unwilling to provide loans to this segment,” he said.

The All India Bank Employees Association (AIBEA) has said that banks must make credit available at a reasonable cost to the MSME sector. 

“We must ensure that banks are ready to increase lending to the MSME sector, as these units face the maximum challenges, and a liquidity shortage could threaten their survival. The focus should be more on MSMEs instead of large corporates,” said C H Venkatachalam, AIBEA general secretary.